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Research

Back to the Renaissance? A New Perspective on America's Cities

Joel Kotkin

September 1997

VENETIAN SOLUTIONS

With mass-manufacturing and mass-produced services increasingly shifting to locales
on the urban periphery or outside the country altogether, cities are unlikely to recapture
their past economic or demographic dominance. To survive, they will have to occupy
those classical economic niches—commercial, artisanal, and cultural—that drove the
growth of great cities in antiquity, the Renaissance, and the early modern period.

History has shown—most spectacularly in the Renaissance and early modern periods—that
cities do not have to achieve demographic dominance to retain an important role in
the economic, cultural, and spiritual life of the general society. However, they must
concentrate on performing those functions in which cities enjoy a competitive advantage
over rural and suburban regions.

One obvious area revolves around trade, particularly international trade. Virtually
all of the great cities since antiquity—from Ur to Alexandria to Venice and the great
cities of the Atlantic era—derived much of their sustenance through exploiting key
trade routes. As world economies have developed through the ages, these have presented
enormous opportunities for cities. As Fernand Braudel notes:

A world economy always has an urban center of gravity, a city, as the logistic heart
of its activity. News, merchandise, capital, credit, people, instructions, correspondence
all flow into and out of the city. Its powerful merchants lay down the law, sometimes
becoming extraordinarily wealthy.

As in Renaissance Venice, early modern Amsterdam, or London, the increasing ethnic
diversity of America's cities is critical to seizing the "cross-cultural" trade niche.
Over the past thirty years, cities such as New York, Los Angeles, Houston, Chicago,
and Miami have become ever more multi-ethnic, with many of the newcomers hailing from
growing trade regions such as East Asia, the Caribbean, and Latin America. Upwards
of three-quarters of America's ten million immigrants during the 1980s settled in
a handful of urban states, with New York and California accounting for roughly half
of that total. As a result, eight of the nation's ten most diverse counties are located
either in the Bay Area, greater New York, or Los Angeles.

In these cities large immigrant clusters often play a role similar to that played
by resident outsiders—like Armenians, Germans, and Jews in Renaissance Venice—by forging
not only economic ties with the city, but critical bonds of cultural exchange and
kinship networks. As futurist Alvin Toffler has observed, these bonds bring with them
financial, market, and other business connections to the global economy:

Rather than looking at ethnic communities as purely sources of trouble, [we should
view them as] resources we can use in penetrating the most vibrant markets in the
world—Asia to the west and Mexico and Latin America to the south. We should be saying:
"Look, Mexican-Los Angelenos, El Salvadorans, South Americans and Asians, look back
to your places of origin and tell us what we can sell to them, what can we do with
them, what partnerships can we make with them?"

This intermingling of demographics and economics can be seen in places such as "Toytown"
on the grimy industrial eastern fringes of downtown Los Angeles. Founded by Charlie
Woo, an immigrant from Hong Kong, the district now consists of over 500 different
toy importers, warehouses, and distributors. Employing roughly 6000 people and with
estimated revenues of $500 million, the district has also engendered a renaissance
in local toy-making and design. This development has allowed Los Angeles to control
roughly 60 percent of the $12 billion in toys sold to American retailers.

Much like renaissance Venice, the sprawling industrial region around downtown Los
Angeles has developed a series of specialized industrial districts tied to the processing,
warehousing, and trading of global products such as toys, textiles, and food products.
At a time when high-rise space in the central city remains in vast oversupply, demand
for modern warehouse and manufacturing space has continued to grow. Just this year,
in the shadow of these near-empty towers, Lowe Development Corporation completed a
23-acre import/export center to service the booming trade sector. "The people who
own the high-rises are going to face the music, but we are developing new properties
for where the future is," Lowe's Doug Hinchcliffe explains. "It's the importers, the
garment people, the immigrants, the Asian entrepreneurs who are driving things around
here now."

In Los Angeles, trade-related activities have spawned the growth of more than 100,000
jobs during the past decade and today sustain a larger number of jobs than aerospace,
previously the region's bellwether industry. But Los Angeles is not alone in its increased
reliance upon cross-cultural trade. Other major immigration entrepots, such as Houston,
Chicago, Miami, and New York have also become increasingly reliant on international
trade, thereby providing a counterweight to the continuing migration of traditional
manufacturing and service jobs towards the periphery.

For cities, which have been losing jobs to suburbs, edge cities, and smaller towns
for much of the last few decades, such trade activities have emerged as one of the
leading sources of new, good paying jobs. Since 1986, according the US Department
of Commerce estimates, the percentage of jobs supported by exports has grown from
7.6 percent to 10.9 percent. Equally important, jobs tied to exports pay an average
of 13 percent higher salaries than those aimed at domestic customers. Jobs in wholesale
trade in California, for example, a field dominated by international commerce, pay
on average $36,000—far above the state average of $29,000. "International trade, if
you look at cities, isn't an option anymore," Kenan's John Kasarda observes. "Now
it's a necessity."

Like Los Angeles, Miami in the 1980s was largely seen as little more than a sun-drenched
paradise gone bad, weighed down by massive immigration from Cuba and other Spanish-speaking
countries. Yet in reality, the massive movement of Latinos into the Florida metropolis
transformed the once sleepy city into the dominant center of "cross-cultural" trade
with South America and the Caribbean basin, an area accounting for nearly one-quarter
of all US trade with South America, including nearly two-fifths of all exports, two-fifths
of all US trade with the Caribbean and almost three-fifths of all US trade with Central
America. Modesto Maidique, himself a Cuban émigré and President of Florida International
University, observes:

If you take away international trade and cultural ties from Miami, we go back to being
just a seasonal tourist destination. It's the imports, the exports, and the service
trade that has catapulted us into the first rank of cities in the world.

Much the same process has taken place in Houston. Following the "oil bust" of the
1980s, the city seemed fated to fall into the ranks of declining urban regions, since
the energy industry had come to complete dominate its economy as of the 1970s. However,
the oil recession, notes University of Houston economist Barton Smith, shifted the
city's focus towards international trade, which has grown by nearly a third since
1986. Smith estimates trade now accounts for roughly ten percent of regional employment,
and played a critical role in the region's 1990s recovery. "After all, oil has been
at the core of our economy since 1901," explains Smith. "Every boom leads people to
forget other parts of the economy. After the bust, people saw the importance of the
ports and trade." Accordingly, although it is renowned for its plethora of "see through"
buildings, Houston last year ranked second in the nation in total office space absorption
and third in increases in rents.

As in Miami and Los Angeles, Houston's expanding trade sector has been enhanced by
the city's growing immigrant population. Between 1985 and 1990, Houston, a traditional
magnet for domestic migrants, suffered a net loss of over 140,000 native born residents.
But the immigrants kept coming—nearly 200,000 over the past decade. In the process,
Houston became one of America's most diverse cities. Houston's Latino population increased
from seventeen percent to more than twenty-seven percent in 1980, while the number
of Asians doubled, growing from barely two percent to more than four percent. By the
year 2000, Houston's minorities—Latino, Asian, and African-American—will constitute
over two-thirds of the city's population.

Among those arriving in Houston during the 1970s boom was a Taiwanese engineer named
Don Wang, who founded Metro Bank with backing from a few Asian friends in 1987. Amidst
the hard times and demographic shifts, Wang and his clients-largely Asian, Latin,
and African immigrants-saw an enormous opportunity to pick up real estate, buy homes,
and start businesses in fields such as food processing, distribution, and electronics
assembly. Recalls Wang:

In the 1980s everyone was giving up on Houston, but we stayed. It was cheap to start
a business here and easy to find good labor. We considered this the best place to
do business in the country, even if no one on the outside knows it.

Today Metro Bank, with assets over $300 million, is Houston's ninth-largest bank.
Perhaps even more importantly, the presence of immigrant communities, most particularly
the Chinese, now plays a critical role in attracting capital to urban areas, which
have often suffered from disinvestment from large financial institutions. Surveys
of new investment from Asia show that major cities—notably Los Angeles, New York,
Houston, Chicago, and San Francisco—garner not only the vast majority of immigrants,
but also most of the investment capital coming from across the Pacific Rim. Foreign
buyers from Europe, Asia, and Latin America have invested heavily in residential properties
as well, particularly in New York.

Possibly no city relies more on its global connections than New York, America's traditional
trade center. Although no longer the hegemonic city of the 1950s, New York has continued
to grow its global business, particularly in service industries such as advertising,
marketing, and finance. This was true even in the 1980s, when foreign banks accounted
for more than half of the total growth in banking employment in the region. For many
New York service firms, business links with Europe, Asia, and Latin America have become
as important as those with their domestic customers, and sometimes even more so.

Typical of New York's new breed of service exporters are companies like Audits and
Surveys, a market research firm located in the fashionable Chelsea section of Manhattan.
Founded thirty years ago, the company has rapidly expanded in recent years into global
markets, with offices in Canada and Latin America, in addition to Asia and Europe.
Foreign-based clients include such companies as Bell Canada, Citizen Watch Company,
Minolta, Nestle, Polygram, and Scandinavian Airline Systems.

To Audits and Survey founder Sol Dutka, the New York locale is critical to his overseas
marketing, since most major global companies already have a strong presence in Gotham.
There is a cosmopolitan cultural climate in New York, he points out, that he's unlikely
to find in cheaper, but more out of the way locales such as Charlotte, North Carolina.
"How many people in Greensville or Charlotte know about East Indians or Koreans—both
big markets?" Dutka asks. "How would you know there are five different kinds of Hispanics—and
each one is a different market?"

But even the greatest of trading cities cannot rely solely upon global transactions
for their economic survival. All of the great European cities of the Renaissance and
early modernity—Florence, Venice, Amsterdam, Antwerp, London—reached their economic
peaks by combining thriving textiles, glass, and shipbuilding industries with their
traditional trade functions. On the other hand, historian Lauro Martines traces the
decline of great trading cities such as Florence and Genoa at least in part to the
gradual weakening of the artisanal sectors even as the transactional economy continued
to expand.

In sharp contrast to mass manufacturing or commodity services, cities enjoy compelling
advantages in artisan-based production. For one thing, these industries rely far more
on the kind of design skills that remain largely centered in urban areas. This shift
plays exactly into the demographic, design, and cultural strengths of core cities.
Julian Tomchin, senior vice-president for special merchandising at Macy's-West in
San Francisco, says most of the "hot" specialty products he seeks out are located
in places like Los Angeles, New York, and San Francisco, where many of the best designers
and fabricators have clustered. "There's a new breed of company out there that is
combining craft-based industry in a factory setting," explains Tomchin, who spent
ten years in the design office for Bloomingdale's before going over to Macy's. "It
used to be part of hippiedom; now it's an industry."

Unfortunately, many urban planners, politicians, and economists have generally shown
little interest in such opportunities. By the early 1990s in New York-once the center
of artisan-based industry in America-the city's planning department openly proclaimed
that "the industrial sector no longer drives the city's economy or exemplifies its
role in the national or international economy." New York social critic Robert Fitch
sees such attitudes as the culmination of a decades-long elite consensus—one that
includes top business, financial, and government leaders—that the precipitous decline
in local manufacturing was "largely inevitable and foreordained."

Yet, as economist Hugh O'Neill has observed, New York still possesses many of the
critical prerequisites for a thriving artisan industrial base—a large nearby market,
a world-class design community, a growing population of economically motivated, and,
in some cases, quite skilled immigrants. Firms making such things as ethnic-oriented
food products, mannequins for the garment trade, and printers servicing the financial
service industry all have good logical reasons to locate in New York.

Tangible evidence of a potential resurgence in specialized urban industry can be seen
in Houston and Los Angeles. In recent years, both cities have witnessed expanded industrial
employment, especially in smaller, specialized firms. Between 1995 and 1997, Los Angeles
gained over 20,000 manufacturing job in industries ranging from apparel, textiles,
furniture, and food processing to highly specialized fields such as aerospace and
metals. Houston meanwhile has seen its industrial economy expand even more rapidly,
with industrial jobs growing in excess of three percent annually by the mid-1990s.

As in the case of "cross-cultural" trade, immigrants have provided a strong boost
to specialty manufacturing. Much has been written about the low-end, often exploitative
parts of the LA soft goods industry which employs close to 150,000 people. But if
wages for the predominately Latino workforce remain lower than might be acceptable
to native born Americans, by 1990 they had helped push Latino family incomes—largely
due to pooling of wages—above their counterparts in New York as well as in other cities.

Ceramics maker L.A. Pottery has a workforce that is largely made up of Latino immigrants,
many of whom bring tactile skills that they developed in their villages back home.
Combined with the design skills of company founder Laurie Gates, himself an immigrant
from Canada, the company has expanded through the Southern California recession, even
developing large overseas markets in such traditional centers of ceramic production
as Germany and Japan. "Each piece we create is different. It's a work of art that
many people can afford to have in their homes," explains Gates, who now employs seventy
people at his west LA factory. "It's the touch of design that opens so many doors."